Guy Saint-Pierre Chairman
of the Board, Royal Bank of Canada toBoard of Trade of Metropolitan
Montreal at Montreal, Quebec February 26, 2002

Ladies and gentlemen,

It is always
an honour to be asked to address you and it is with pleasure that I have accepted
the Board of Trade of Metropolitan Montreal's invitation to do so. While I have
been invited in my capacity as chairman of the board of Royal Bank, I have decided
not to speak as a banker. I will therefore spare you the bank's economic forecasts,
or its stance on government monetary policy or regulation of the financial services
industry.

Instead, I would like to share with you some reflections
on a topic of concern to me, namely, the relationship between the State and citizens.

According
to Freedom House, an international democracy watchdog, 120 countries representing
nearly 60% of the world's population had democratic governments in 2000, a peak
in the history of humankind.

Thus, democracy is making progress
amidst constant social upheaval. For the first time in history, a majority of
inhabitants of the Earth can say, "We are the State," a situation that can only
foster optimism among citizens of the world.

However, while democracy
is progressing, a malaise is appearing in the older democracies. It would seem
that for the past 50 years, the relationship between citizens and the State in
the industrialized countries has been deteriorating. At the very time when an
unprecedented number of people can claim, "We are the State," growing numbers
of citizens in democratic countries find themselves at odds with the State. This
is, in any event, the conclusion of analyses conducted by American political scientists
and published in 2000 in a book entitled Disaffected Democracies. Surveys carried
out since the 1950s among citizens in most of the industrialized nations reveal
a constant decline in the public's trust of governments and people in power. From
Australia to Sweden, not to mention Canada, the United States and France, the
surveys' findings are perplexing: citizens no longer trust the State.

It
may well be thought that this break is in fact a sign that democracy is in excellent
health and that an effective democracy is based on public mistrust of the State.
After all, the founding fathers of the United States made this mistrust an underlying
principle of their Constitution.

However, it is one thing to
mistrust people in power. It is an entirely different matter to feel disillusioned
with regard to democratic processes and the institutions that sustain such processes.
Other research indicates that, in almost all of the established democracies, voter
turnout has tended to decline in the second half of the 20th century. Canada is
no exception to the rule - in fact, it has one of the lowest voter turnouts of
all the industrialized nations. Between the 1984 and 2000 federal elections, voter
turnout fell from 75% to 61%. While this situation is certainly not disastrous,
I do find it troubling.

Together, the lack of trust and disillusionment
of voters are worrisome. It would seem that, for many citizens, "The State is
them."

The relationship between citizens and the State is not
a matter of mere academic interest. In a country like Canada, even in the wake
of the fiscal rigour that characterized the 1990s, government spending stills
represents over 40% of GDP and government regulation weighs heavily on the 60%
accounted for by the private sector. At another level, the individual comes into
regular contact with the government. For most of us, it is the public sector that
provides our health care from cradle to grave, educates our children, maintains
our roadways, collects garbage and delivers many other services. I have not even
mentioned our fascinating annual correspondence with tax officials. Canadian citizens
are condemned, if I may say so, to being clients of their public sector, which
explains why the quality of this relationship is of the utmost importance.

This
may disappoint or reassure you. But let me say right away that I do not have a
pat answer for you. Over the years, I have learned to be cautious about giving
lessons. As a corporate director, my task is now to ask the right questions instead
of giving answers. For this reason, it is in a questioning mode that I would like
to share with you my reflections on the relationship between the State and the
citizen.

Is the quality of the State declining?
Let us begin at the beginning. The first question is this: Has the quality of
the State declined over the past 20 or 30 years?

I am not aware
of an objective measurement that allows us to compare the quality of the State
today to what it was a generation ago, although impressions and anecdotes abound.
Waiting lines in hospitals and the state of certain infrastructures are but some
of the indicators that suggest a deterioration in public services in recent decades.
We have all experienced firsthand or heard anecdotes about the insensitive, absurd
or indeed abusive behaviour of bureaucrats.

Perhaps the State's
performance is deteriorating because it is trying to do too much. The size of
the State is not measured solely in proportion to GDP. It is also measured by
the span of its fields of intervention. It is believed that a private company
cannot excel in all things and one that over-diversifies risks diluting its know-how
and ending up mediocre in all things. However, people rarely question the ability
of governments to diversify as they have done for half a century. Popular wisdom
long ago perceived the problems that this raises, or as the old adage would have
it, "jack of all trades, master of none."

Are we demanding
too much of the State? My second question is this: Are we demanding
too much of the State? Democracy may be the victim of its own success. We expect
a lot more of our governments now than we did a generation ago. Of these governments
which inspire less and less public trust, we nevertheless demand that they support
employment, regulate the economy, reduce socio-economic disparities, protect the
environment, defend women and minorities, foster the development of businesses
and consumer protection, guarantee access to education and health, all that while
jealously protecting our individual freedoms. Quite an agenda! If we want to have
our cake and eat it too, we are bound to be disappointed.

Let
us take the example of health care. We all dream of having immediate access to
the best health care for all those who need it, without new taxes, while minimizing
the private sector's role, because it is immoral to profit from illness. That
is just one example. We could formulate other fantasies of the same kind with
respect to education, environmental protection, the protection of privacy, in
a word, as regards any of the numerous responsibilities entrusted to the State.

We
all too easily forget that the State cannot perform miracles. It cannot pull resources
out of a hat. We are the State and the money is always ours.

I
am not trying to rekindle debate on whether we need more or less government. When
we examine the State's role in this manner, we inevitably lapse into dogmatism.
What we must strive for is a better State, which demands a pragmatic rather than
a dogmatic approach. Private sector, public sector, one thing never changes -
it's always the people's money. Regardless of the nature of the goods and services
that we consume, the approaches are fairly limited, that is, either we pay the
producer directly, or through a private, for-profit or non-profit organization,
or through the State. Whatever the approach, we pay. There is never a free lunch.
If it looks free, it is an illusion.

What is at stake with regard
to the State's role is simply the best way to organize things in order to attain
two key objectives.

First,
an efficient use of resources. Whether focused on the public or the private sector,
no ideology in the world warrants wasting resources and no society can afford
to waste, since waste is a loss for society as a whole.

Second, a fair use of resources. We must use our resources in a way that reflects
the social solidarity of which Canadians are so proud, and rightly so.

Canadians can maintain their intrinsic values and still be efficient.

I
avoid being dogmatic with respect to these two objectives. During my career, I
have managed private-sector firms that did part of their business with governments
and government-owned corporations not only in Canada but the world over. In Quebec,
I served as the minister responsible for a public education system that had and
maintains a large private component. During these years, I have learned, and I
am still convinced, that the private and public sectors can coexist. I have learned
that government intervention can be compatible with the efficient use of resources.
However, I have also learned that intervention by the private sector can be compatible
with the fair use of resources.

Allow me to take the example
of education. In Quebec, as in all the other provinces, the private and public
sectors coexist. Such coexistence is sound not only because it gives parents a
choice of schools for their children, but also because it is a source of healthy
competition, which enhances the quality of education overall. There are excellent
public educational institutions, just as there are excellent institutions in the
private sector. While we must acknowledge that our education system does have
problems, we must also admit that the most recent international comparisons are
encouraging. A study conducted by the OECD of 15-year-olds the world over ranked
Canadian youth among the world's leaders in basic reading, math and science skills.

Let
us now turn to health care. We have one of the most rigidly public systems in
the world. According to the World Health Organization, our system ranks 30th in
the world in terms of quality and accessibility of care. Thirtieth! The very least
that can be said is that there is room for improvement. There is room for change.
There is every reason to ask questions, formulate hypotheses and even experiment.
Ranking 30th should make us highly receptive to new ideas or models that work
elsewhere. Yet it is very hard to question the status quo regarding the organization
of health care in Canada. Of course, there is talk of making our public health
care system more efficient, but I cannot help but think that we are only looking
for new ways to shuffle chairs on the Titanic. Even today, any mention of changing
the fundamental organization of health care all too often sparks an outcry.

I
have picked the health care system as an example because its topical nature illustrates
my concern. What should be a resource allocation issue still engenders dogmatic
responses. It is legitimate to raise the question of the respective roles of the
State and the private sector. But if we cannot put the question clearly, we will
not find the right answer.

Are people in power promising too
much? My third question is this: Are people in power promising too much?
It may well be that the public and those in power have created a costly spiral
in which we are all accomplices. After all, it is said that a politician's word
is only binding on his or her listener.

On the one hand, we can
deplore that we have expected too much of our governments, but on the other hand,
it must be said that governments are very careful not to destroy our illusions.
Just as bureaucracies like to extend their power, so do politicians willingly
make exaggerated political promises.

It is deplorable that political
discourse continues to hinge on promises that cannot be kept and oversimplifications
formulated in light of the demands of television newscasts. It is deplorable that
such discourse sometimes appears to infantilize voters.

It is
normal and desirable for political discourse to continue to centre on politicians'
commitments and that such discourse be accessible to everyone. However, I like
to think that the most educated electorate in our history and one of the most
educated in the world is more interested in the political choices to be made than
in personal attacks. I also like to think that this electorate is capable of understanding
the genuine issues and the true constraints pertaining to its choices. The drop
in voter turnout should spur politicians to find ways of communicating with voters.

Adapting
ourselves to a less consensual society My fourth question is this: Does
the electorate's disillusionment indicate that our political system is not adapted
to a society that is growing less and less consensual? Over the past 50 years,
technological progress has enabled us to shift from highly standardized mass consumption
to tailor-made consumption, which fully reflects our individuality. The choices
available to consumers have proliferated, whether with regard to cars, food or
literature. At the same time, marketing campaigns are more and more finely segmented,
to the extent that consumers almost feel that they are the targets of a personal
appeal. Even more basically, the individual today is in a position to make many
more life choices than was the case a generation ago.

On the
other hand, the political sphere has not followed the same course. Under the electoral
systems prevailing in North America, the parties that want to take power must
seek to please a wide spectrum of the electorate or a majority of voters, otherwise
they will not be heard. The discourse of our major political parties is the political
equivalent of the Model T Ford. As Henry Ford said, "You can paint it any color,
so long as it's black." It is possible that today's citizens, accustomed as they
are to quasi-personal appeals, fail to identify with the standardized discourse
of political parties.

Can we improve the situation?
Can we reverse this trend? Can we restore the individual's enthusiasm for public
life? I would like to think that we could.

To this end, I believe
it is important for citizens to assume control of their State. By this, I mean
two things:

On the one hand, it is important for citizens to
participate in the life of their State, which implies, first and foremost, that
they vote in municipal, provincial and federal elections. Regardless of the system's
imperfections, it is too easy to be cynical and to say to oneself that our vote
does not change anything. We have even less impact when we do not vote.

On
the other hand, it is important to realize that the State is not a means to deflect
responsibility for our actions onto someone else. It is one means, and only one
means, available to us to assume responsibility. The State cannot produce miracles.
It is pointless to demand that it do so. It is cynical to promise that it will.

Moreover,
there is good reason to remind the people in power that they are the trustees
of our State - not the owners. They give nothing to the voters that they have
not already taken from them. Furthermore, if I urge my fellow citizens to be responsible,
I must ask those who govern us to treat us like adult citizens. John Stuart Mill
wrote 150 years ago: "A State which dwarfs its men, in order that they may be
more docile instruments in its hands even for beneficial purposes - will find
that with small men no great thing can really be accomplished."

Our
democracy is not in a state of crisis, at least not yet. However, the ongoing
erosion of the public's trust in democratic institutions could ultimately degenerate
and hamper the very functioning of such institutions. Let us not wait for the
crisis. If we want our children to also be able so say "We are the State," I believe
that it is time for us to deal with the matter.